The Frankfurt School respects your privacy

Our websites use various cookies with different functions. These, on the one hand, serve solely technical functions and, on the other hand, also the optimisation of the websites, interaction with social media as well as user related advertising on our pages and those of our partners. You can object to the use of cookies for advertising and analysis purposes in various stages. Click on “Understood and continue” to accept the cookies or click on “Settings” to choose your personal cookie settings.
Further information

Your settings for cookies for this website

Cookies measure user access of our website and realise functions for social media and marketing. We also forward information to our partners for analyses, marketing and social media. Our partners may also amalgamate this information with further data which you have provided or other data which they have collected through the use of their services. You can object to this use in various levels. Please choose your personal preference to do so. Further information available
here
.

Necessary cookies

Functional cookies support the usability of the Frankfurt School website and enable, for example, the basic functions of the website such as log-in, page navigation and saving of the products during your session. The website would not function properly without these cookies. Further information available
here
.

Analysis cookies

These cookies provide information on how a website is used (for example the average duration of page visit and how often it is viewed) and enable an ongoing optimisation of the website. Further information available
here
.

Menglu Zhuang is a sustainable finance expert at the Frankfurt School-UNEP Centre and a researcher at the Frankfurt School faculty. Her role is to research in sustainable financial topics and manage the content development of educational programs on the topic of sustainable finance.

Sustainable finance-related regulatory attention is turning towards financial and non-financial institutions. If you work in the top management of a financial institution or a production company in Germany, you must have heard one or two things about the discussions on voluntary and mandatory disclosures on Environmental, Social, Governance (ESG) issues. If you are an asset manager, you must have learnt about the fiduciary duties, which provide you legal support in considering ESG issues in client portfolios.

Together with Karsten Löffler and Sebastian Rink, we have written a chapter in the new book on sustainable finance Nachhaltige Finanzwirtschaft: Grundlagen und Konzepte für die Praxis (Sustainable Finance: Basics and concepts for practice), which is available in the market since April 2020. In our chapter titled Regulatorische Entwicklungen hin zu einer nachhaltigen Finanzwirtschaft – Historie und Ausblick (Regulatory developments towards sustainable finance – history and outlook), we provide a historical look-back on the fast regulatory developments in Europe, inter alia Germany and make several suggestions on how financial institutions could prepare themselves for the upcoming challenges and opportunities. If you have already felt the regulatory attention in your job, it is time to get an overview on the current situation.

Fast regulatory developments in the past 5 years

From our observations, the fast regulatory developments since 2015 have set the stage and roadmaps for sustainable finance in Europe. The TCFD has set climate-related disclosure in motion. The European Commission sets out the roadmap for financing sustainable growth and is active in supporting various related actions, e.g. the final report on the EU taxonomy is published to facilitate a standardized classification of economic activities. Within Germany, the sustainable finance advisory council is established to develop sustainable financial strategies. In general, sustainable finance guidelines on the national and regional level are being developed for regulatory authorities to ensure a stronger focus on supervisory procedures.

Reducing information asymmetry in the financial market and more

Many policies in the European sustainable finance area have focused on improving the quality and the quantity of information. This is because information is key for the financial market to generate accurate price signals and investors need climate-related information in investment decision making. The regulatory initiatives on improving transparency and strengthening disclosure serve exactly this purpose. Besides, policy discussions also extend to sustainability risks in risk management, sustainable financial product-related measures, financial system governance and incentive systems, and enhancing general research efforts in this field.

A new era has come

EU-level and Europe-wide national strategies and actions signal that sustainable finance is not a fast-fading trend, but rather a long-lasting transformative force in the financial system. Under the COVID-19 crisis, sustainability should remain a key dimension of decision matrix, e.g. in designing the green stimulus packages for economic recovery in Europe. In the new era, in which sustainability is a key consideration in many important political and commercial decisions, it will with no doubt be beneficial for financial and non-financial institutions to stay informed about the regulatory developments and become first movers in the field of sustainable finance.